Exhibit
10.2
Execution
Copy
MANAGEMENT
DIRECTOR INDEMNIFICATION AGREEMENT
This Director
Indemnification Agreement, dated as of March 27, 2009 (this “
Agreement ”), is made by and between
FirstEnergy Corp., an Ohio corporation (the “
Company ”), and ___________________(“
Indemnitee ”), who is a director and officer of
the Company.
RECITALS
:
A. Section 1701.59
of the Ohio Revised Code (the “ORC” )
provides that the business and affairs of a corporation shall be
managed by or under the direction of its directors.
B. By
virtue of the managerial prerogatives vested in the directors of an
Ohio corporation, directors act as fiduciaries of the corporation
and its shareholders.
C. Thus,
it is critically important to the Company and its shareholders that
the Company be able to attract and retain the most capable persons
reasonably available to serve as directors of the
Company.
D. In
recognition of the need for corporations to be able to induce
capable and responsible persons to accept positions in corporate
management, ORC §1701.13(E) authorizes (and in some instances
requires) corporations to indemnify their directors and officers,
authorizes (and sometimes requires) corporations to advance funds
to pay for expenses of its directors and officers prior to the
final disposition of an action, suit or proceeding, and further
authorizes corporations to purchase and maintain insurance for the
benefit of their directors and officers.
E. Indemnification
by a corporation serves the policies of (1) allowing directors and
officers to resist unjustified lawsuits, secure in the knowledge
that, if vindicated, the corporation will bear the expense of
litigation; (2) encouraging capable women and men to serve as
corporate directors and officers, secure in the knowledge that the
corporation will absorb the costs of defending their honesty and
integrity; and (3) allowing directors, officers and corporations to
dispose of vexatious and distracting litigation through negotiation
of settlements.
F. The
number of lawsuits challenging the judgment and actions of
corporate directors and officer, the costs of defending those
lawsuits, and the threat to directors’ and officers’
personal assets have all materially increased over the past several
years, chilling the willingness of capable women and men to
undertake the responsibilities imposed on corporate directors and
officers.
G. Federal
legislation and rules adopted by the Securities and Exchange
Commission and the national securities exchanges have imposed
additional disclosure and corporate governance obligations on
directors and officers of public companies and have exposed such
directors and officers to additional and substantially broadened
civil liabilities.
H. These
legislative and regulatory initiatives have also exposed directors
and officers of public companies to a significantly greater risk of
criminal proceedings, with attendant defense costs and potential
criminal fines and penalties.
I. Under
Ohio law, a director’s right to be reimbursed for the costs
of defense of criminal actions, whether such claims are asserted
under state or federal law, does not depend upon the merits of the
claims asserted against the director, which are separate and
distinct from any right to indemnification the director may be able
to establish, and indemnification of the director against criminal
fines and penalties is permitted if the director satisfies the
applicable standard of conduct as a director.
J. Indemnitee
is a director and officer of the Company and Indemnitee’s
willingness to continue to serve in such capacity is predicated, in
substantial part, upon the Company’s willingness to indemnify
Indemnitee in accordance with the principles reflected above, to
the fullest extent permitted by the laws of the state of Ohio, and
upon the other undertakings set forth in this Agreement.
K. Regulation
31 of the Company’s Amended Code of Regulations (the
“Regulations”) require the Company to indemnify each
director and officer and former director and officer of the Company
to the full extent then permitted by law. However,
recent court decisions in Delaware, while not binding on the courts
of Ohio interpreting Ohio law, have raised questions as to the
ability of directors and officers generally to rely on such
provisions following their retirement or other departure from the
board in the event that there is a subsequent amendment to the
Regulations that alters or eliminates the indemnification
provisions of those documents.
L. Regulation
33 of the Company’s Regulations provides that the Company,
with the approval of the Board of Directors may enter into
agreements with any persons that the Company may indemnify under
the Regulations, and undertake thereby to indemnify such persons
and to pay the expenses incurred by them in defending any action,
suit or proceeding against them, whether or not the Company would
have power under the law or the Regulations to indemnify such
person.
M. Therefore,
in recognition of the need to provide Indemnitee with contractual
protection against personal liability, in order to procure
Indemnitee’s continued service as a director and officer of
the Company and to enhance Indemnitee’s ability to serve the
Company in an effective manner, and in order to provide such
protection pursuant to express contract rights (intended to be
enforceable irrespective of, among other things, any amendment to
the Company’s Amended Articles of Incorporation or the
Regulations (collectively, the “ Constituent
Documents ”), any change in the composition of the
Company’s Board of Directors (the “ Board
”) including, but not limited to, the retirement of a
director, or any change-in-control or business combination
transaction relating to the Company), or any change in the
officer’s status through retirement or resignation, the
Company wishes to provide in this Agreement for the indemnification
of and the advancement of Expenses (as defined in Section 1(e)) to
Indemnitee as set forth in this Agreement and for the continued
coverage of Indemnitee under the Company’s directors’
and officers’ liability insurance policies.
N. In
light of the considerations referred to in the preceding recitals,
it is the Company’s intention and desire that the provisions
of this Agreement be construed liberally, subject to their express
terms, to maximize the protections to be provided to Indemnitee
hereunder.
NOW, THEREFORE,
the parties hereby agree as follows:
1.
Certain
Definitions. In
addition to terms defined elsewhere herein, the following terms
have the following meanings when used in this Agreement with
initial capital letters:
(a)
“Change in Control”
means the
occurrence after the date of this Agreement of any of the following
events:
(i)
the
acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
“Person” ) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of the combined voting power of the
then-outstanding Voting Stock of the Company; provided ,
however , that:
(A)
for
purposes of this Section 1(a)(i), the following acquisitions
will not constitute a Change in Control: (1) any acquisition
of Voting Stock of the Company directly from the Company that is
approved by a majority of the Incumbent Directors, (2) any
acquisition of Voting Stock of the Company by the Company or any
Subsidiary, (3) any acquisition of Voting Stock of the Company
by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Subsidiary, and (4) any
acquisition of Voting Stock of the Company by any Person pursuant
to a Business Combination that complies with clauses (A), (B) and
(C) of Section 1(a)(iii) below;
(B)
if
any Person acquires beneficial ownership of 20% or more of combined
voting power of the then-outstanding Voting Stock of the Company as
a result of a transaction described in clause (A)(1) of
Section 1(a)(i) and such Person thereafter becomes the
beneficial owner of any additional shares of Voting Stock of the
Company representing 1% or more of the then-outstanding Voting
Stock of the Company, other than in an acquisition directly from
the Company that is approved by a majority of the Incumbent
Directors or other than as a result of a stock dividend, stock
split or similar transaction effected by the Company in which all
holders of Voting Stock are treated equally, such subsequent
acquisition will be deemed to constitute a Change in
Control;
(C)
a
Change in Control will not be deemed to have occurred if a Person
acquires beneficial ownership of 20% or more of the Voting Stock of
the Company as a result of a reduction in the number of shares of
Voting Stock of the Company outstanding unless and until such
Person thereafter becomes the beneficial owner of any additional
shares of Voting Stock of the Company representing 1% or more of
the then-outstanding Voting Stock of the Company, other than in an
acquisition directly from the Company that is approved by a
majority of the Incumbent Directors or other than as a result of a
stock dividend, stock split or similar transaction effected by the
Company in which all holders of Voting Stock are treated equally;
and
(D)
if at
least a majority of the Incumbent Directors determine in good faith
that a Person has acquired beneficial ownership of 20% or more of
the Voting Stock of the Company inadvertently, and such Person
divests as promptly as practicable a sufficient number of shares so
that such Person beneficially owns less than 20% of the
Voting
Stock of the
Company, then no Change in Control will have occurred as a result
of such Person’s acquisition; or
(ii)
a
majority of the Directors are not Incumbent Directors;
or
(iii)
the
consummation of a reorganization, merger or consolidation, or sale
or other disposition of all or substantially all of the assets of
the Company or the acquisition of assets of another corporation, or
other transaction (each, a “Business
Combination” ), unless, in each case, immediately
following such Business Combination (A) all or substantially
all of the individuals and entities who were the beneficial owners
of Voting Stock of the Company immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60%
of the combined voting power of the then outstanding shares of
Voting Stock of the entity resulting from such Business Combination
(including, without limitation, an entity which as a result of such
transaction owns the Company or all or substantially all of the
Company’s assets either directly or through one or more
subsidiaries), (B) no Person (other than the Company, such
entity resulting from such Business Combination, or any employee
benefit plan (or related trust) sponsored or maintained by the
Company, any Subsidiary or such entity resulting from such Business
Combination or a holding company as described in ORC
§1701.802(A)) beneficially owns, directly or indirectly, 20%
or more of the combined voting power of the then outstanding shares
of Voting Stock of the entity resulting from such Business
Combination, and (C) at least a majority of the members of the
Board of Directors of the entity resulting from such Business
Combination were Incumbent Directors at the time of the execution
of the initial agreement or of the action of the Board providing
for such Business Combination; or
(iv)
approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company, except pursuant to a
Business Combination that complies with clauses (A), (B) and (C) of
Section 1(a)(iii).
For purposes of
this Section 1(a) and as used elsewhere in this Agreement, the
following terms have the following meanings:
(A)
“ Exchange Act ” means the
Securities Exchange Act of 1934, as amended.
(B)
“Incumbent Directors” means the
individuals who, as of the date hereof, are Directors of the
Company and any individual becoming a Director subsequent to the
date hereof whose election, nomination for election by the
Company’s shareholders, or appointment, was approved by a
vote of at least two-thirds of the then Incumbent Directors (either
by a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director,
without objection to such nomination); provided ,
however , that an individual will not be an Incumbent
Director if such individual’s election or appointment to the
Board occurs as a result of an actual or threatened election
contest (as described in Rule 14a-12(c) of the Exchange Act)
with respect to the election or removal of Directors or other
actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board.
(C)
“Subsidiary” means an entity in which the
Company or any holding company as described in ORC
§1701.802(A) directly or indirectly beneficially owns 50% or
more of the outstanding Voting Stock.
(D)
“Voting Stock” means securities entitled
to vote generally in the election of directors (or similar
governing bodies).
(b)
“ Claim ” means (i) any threatened,
asserted, pending or completed claim, demand, action, suit or
proceeding, whether civil, criminal, administrative, arbitrative,
investigative or other, and whether made pursuant to federal, state
or other law; and (ii) any threatened, pending or completed
inquiry or investigation, whether made, instituted or conducted by
the Company or any other person, including without limitation any
federal, state or other governmental entity, that Indemnitee
determines might lead to the institution of any such claim, demand,
action, suit or proceeding.
(c)
“Controlled
Affiliate” means any
corporation, limited liability company, partnership, joint venture,
trust or other entity or enterprise, whether or not for profit,
that is directly or indirectly controlled by the
Company. For purposes of this definition,
“control” means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or
policies of an entity or enterprise, whether through the ownership
of voting securities, through other voting rights, by contract or
otherwise; provided that direct or indirect beneficial
ownership of capital stock or other interests in an entity or
enterprise entitling the holder to cast 20% or more of the total
number of votes generally entitled to be cast in the election of
directors (or persons performing comparable functions) of such
entity or enterprise will be deemed to constitute control for
purposes of this definition.
(d)
“ Disinterested Director ” means a
director of the Company who is not and was not a party to the Claim
in respect of which indemnification is sought by
Indemnitee.
(e)
“ Expenses ” means reasonable
attorneys’ and experts’ fees and expenses and all other
reasonable costs and expenses paid or payable in connection with
investigating, defending, being a witness in or otherwise
participating in (including on appeal), or preparing to
investigate, defend, be a witness in or otherwise participate in
(including on appeal), any Claim, and any amounts paid in
settlement prior to a final, nonappealable judgment or
conviction.
(f)
“ Indemnifiable Claim ” means any
Claim based upon, arising out of or resulting from (i) any
actual, alleged or suspected act or failure to act by Indemnitee in
his or her capacity as a director, officer, employee or agent of
the Company or as a director, officer, employee, member, manager,
trustee or agent of any other corporation, limited liability
company, partnership, joint venture, trust or other entity or
enterprise, whether or not for profit, as to which Indemnitee is or
was serving at the request of the Company as a director, officer,
employee, member, manager, trustee or agent, (ii) any actual,
alleged or suspected act or failure to act by Indemnitee in respect
of any business, transaction, communication, filing, disclosure or
other activity of the Company or any other entity or enterprise
referred to in clause (i) of this sentence, or
(iii) Indemnitee’s status as a current or former
director, officer, employee or agent of the Company or as a current
or former director, officer, employee, member, manager, trustee or
agent of the Company or any other entity or enterprise referred to
in clause (i) of this sentence or any actual, alleged or
suspected act or failure to act by Indemnitee in connection with
any obligation or restriction imposed upon Indemnitee by reason of
such status. In addition to any
service at the
actual request of the Company, for purposes of this Agreement,
Indemnitee will be deemed to be serving or to have served at the
request of the Company as a director, officer, employee, member,
manager, trustee or agent of another entity or enterprise if
Indemnitee is or was serving as a director, officer, employee,
member, manager, trustee or agent of such entity or enterprise and
(i) such entity or enterprise is or at the time of such
service was a Controlled Affiliate, (ii) such entity or
enterprise is or at the time of such service was an employee
benefit plan (or related trust) sponsored or maintained by the
Company or a Controlled Affiliate, or (iii) the Company or a
Controlled Affiliate directly or indirectly caused or authorized
Indemnitee to be nominated, elected, appointed, designated,
employed, engaged or selected to serve in such capacity.
(g)
“ Indemnifiable Losses” means any and all
Losses relating to, arising out of or resulting from any
Indemnifiable Claim.
(h)
“ Independent Counsel ” means a law firm,
or a member of a law firm, that is experienced in matters of
corporation law and neither presently is, nor in the past five
years has been, retained to represent: (i) the
Company (or any Subsidiary) or Indemnitee in any matter material to
either such party (other than with respect to matters concerning
the Indemnitee under this Agreement, or of other indemnitees under
similar indemnification agreements), or (ii) any other named
(or, as to a threatened matter, reasonably likely to be named)
party to the Indemnifiable Claim giving rise to a claim for
indemnification hereunder. Notwithstanding the
foregoing, the term “Independent Counsel” will not
include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of
interest in representing either the Company or Indemnitee in an
action to determine Indemnitee’s rights under this
Agreement.
(i) “
Losses ” means any and all Expenses, damages,
losses, liabilities, judgments, fines, penalties (whether civil,
criminal or other) and amounts paid in settlement following a
final, nonappealable judgment or conviction, including without
limitation all interest, assessments and other charges paid or
payable in connection with or in respect of any of the
foregoing.
2.
Indemnification
Obligation. Subject
to Section 7, the Company shall indemnify, defend and hold
harmless Indemnitee, to the fullest extent permitted or required by
the laws of the State of Ohio in effect on the date hereof or as
such laws may from time to time hereafter be amended to increase
the scope of such permitted indemnification, against any and all
Indemnifiable Claims and Indemnifiable Losses; provided ,
however , that, except as provided in Sections 4 and
20, Indemnitee will not be entitled to indemnification pursuant to
this Agreement in connection with any Claim initiated by Indemnitee
against the Company or any director or officer of the Company
unless the Company has joined in or consented to the initiation of
such Claim.
3.
Advancement of
Expenses. Indemnitee
will have the right to advancement by the Company prior to the
final disposition of any Indemnifiable Claim of any and all
Expenses relating to, arising out of or resulting from any
Indemnifiable Claim paid or incurred by Indemnitee or which
Indemnitee determines are reasonably likely to be paid or incurred
by Indemnitee. Indemnitee’s right to such
advancement is not subject to the satisfaction of any standard of
conduct. Without limiting the generality or effect of
the foregoing, within five
business days
after any request by Indemnitee, the Company shall, in accordance
with such request (but without duplication), (a) pay such
Expenses on behalf of Indemnitee, (b) advance to Indemnitee
funds in an amount sufficient to pay such Expenses, or (c)
reimburse Indemnitee for such Expenses; provided that
Indemnitee shall repay, without interest any amounts actually
advanced to Indemnitee that, at the final disposition of the
Indemnifiable Claim to which the advance related, were in excess of
amounts paid or payable by Indemnitee in respect of Expenses
relating to, arising out of or resulting from such Indemnifiable
Claim. For purposes of obtaining payments of Expenses in
advance of final disposition, the Indemnitee shall submit to the
Company a sworn request for advancement of Expenses substantially
in the form of Exhibit A attached hereto and made a part hereof
(subject to Indemnitee filling in the blanks therein and selecting
from among the bracketed alternatives therein, the “
Undertaking ”), averring that the Indemnitee
has reasonably incurred or will reasonably incur actual Expenses in
defending an Indemnifiable Claim. The Undertaking need
not be secured and the Company must accept the Undertaking without
reference to Indemnitee’s ability to repay the
Expenses. Unless (x) at the time of the
Indemnitee’s act or omission at issue, the Constituent
Documents prohibit such advances by specific reference to ORC
Section l701.13(E)(5)(a), (y) the only liability asserted against
the Indemnitee in the subject action, suit or proceeding is
pursuant to ORC Section 1701.95, or (z) the Board of Directors
determines, by a majority vote of a quorum consisting of the
Disinterested Directors, the only liability asserted against the
Indemnitee in t
